【TPPERSON推荐】国际税收学习书目英文版之一：《利润分割法的未来》（EN)
【TPPERSON推荐】国际税收学习书目英文版之一：《利润分割法的未来》（EN)
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The Future of the Profit Split Method
EDITED BY
ROBERT DANON
GUGLIELMO MAISTO
VIKRAM CHAND
GABRIELLA CAPPELLERI
Published by:
Kluwer Law International B.V.
PO Box 316
2400 AH Alphen aan den Rijn
The Netherlands
E-mail: international-sales@wolterskluwer.com
Website: lrus.wolterskluwer.com
ISBN 978-94-035-2430-6
e-Book: ISBN 978-94-035-2431-3
web-PDF: ISBN 978-94-035-2432-0
2021 Robert Danon, Guglielmo Maisto, Vikram Chand & Gabriella Cappelleri
Preface
As affirmed by one of the authors, ‘The Revised Guidance on Profit Splits’ is, to a large extent, the culmination of the OECD work on risks and intangibles in the course of the BEPS Actions 8–10 ‘Aligning Transfer Pricing Outcomes with Value Creation’. This work entailed three public discussions and three discussion drafts, which received over 150 comments. Although the revised guidance is controversial, these numbers highlight two aspects.
First of all, this is the culmination of the evolution of the OECD approach to the transfer pricing methods, which began with the 1979 OECD Report that recognized a general possibility to apply the so-called other methods. Indeed, in recent years, the profit split method has received considerable attention as a method to counteract BEPS issues. As affirmed by the Final Report, ‘ consultation process confirmed that transactional profit splits can offer a useful method which has the potential when properly applied, to align profits with value creation in accordance with the arm’s length principle and the most appropriate method, particularly in situations where the features of the transaction make the application of other transfer pricing methodologies problematic’. The identification of profit split methods as the method to tackle BEPS has perhaps led the OECD to expand the scope of situations in which a profit split method will effectively be regarded as the most appropriate method. However, a likely increased application of the profit split methods should not be confused with a de facto departure from the most appropriate method standard set forth by the OECD Guidelines. This standard still remains the basis of the process of selecting the transfer pricing method based on the OECD Guidelines: the profit split methods should not be considered a method to be applied when it is difficult to apply what is actually the most appropriate method.
The second aspect concerns the many issues arising from the application of this method. These issues affect several areas: the application of the OECD Guidelines and the UN Manual, as well as the relationship with the State aid and indirect taxation topics.
As observed by the OECD at the outset of the work on profit split methods, it is necessary ‘to reflect on clarifying, improving, and strengthening the guidance on when it is appropriate to apply a transactional profit split method and how to do so, since experiences indicate that this method may not be straightforward for taxpayers to apply, and may not be straightforward for tax administrations to evaluate’. However, as shown by the analysis carried out in the second and following parts of this book, these aspects are still largely open: How should the different relevant factors for the application of profit split methods be considered? What is the profit to be split? What are the factors to split the profit?
Such a conclusion on the open issues related to the profit split method also emerged from the work of the EU Joint Transfer Pricing Forum, which affirms that ‘The main challenge in the application of the PSM highlighted by the survey is the choice of the appropriate splitting factors, their relative weights and the valuation of the contributions, especially heterogeneous contributions (they featured in practically all of the replies as one of the main challenges in applying the profit split methods).’
As already stated, the question is whether the lack of clear guidance may entail extreme complexity for taxpayers and tax authorities alike, broad uncertainties and outcomes that are potentially not aligned with the arm’s-length standard. This concern also stems from the countries’ chapters of this book, which highlight the experience of countries – particularly during the tax audit phase. They all indicate a high level of uncertainty in terms of results and alignment to the international guidance in the application of the profit split methods.
Moreover, further consideration should be made in the following two possible different and extreme scenarios. If the profit split method is applied in an articulated way, additional attention should be paid to the assessments made by the European Commission on State aid. Indeed, in this scenario, the European Commission could consider the application of the profit split as ‘artificial and complex’.
Instead, in the case of a simplified application of the profit split method, e.g., as proposed by the Commission Service to the Joint Transfer Pricing Forum, it is possible that a ‘soft’ introduction of the formulary apportionment may occur. This would create a concrete risk of a departure from the arm’s-length principle that would remain, therefore, confined to the role of a mere inspiring principle within this approach. Some pressure in this direction could also come from the OECD’s work on the digital economy.
In fact, the Profit Split Method (albeit a new version) is at the centre state vis-à-vis the Digital Economy Debate. Action 1 of the BEPS project, which is now Pillar I of the OECD’s digital project, deals with re-allocating profits of large MNEs to market/user countries. A new/modified version of the PSM applicable on a residuary basis has been put forward as a solution. It is considered to be a new/modified version as it goes beyond the ALP. This is because the new/modified approach applies on an MNE Group basis as opposed to being applied on a separate entity basis. Moreover, it uses a pre-determined approach to determine the profits to the re-allocated as opposed to a facts and circumstances analysis that is deployed under a transactional profit split. The details of the new approach, which has been analysed towards the end of this book, have been made public in the recently released blueprint on Pillar I.
In light of the above backdrop, the application of the PSM is under the spotlight. Undoubtedly, the existing and new version will be applied widely by taxpayers and tax administrations. Considering these developments, this book undertakes an in-depth analysis of the PSM applicable within and beyond the boundaries of the ALP from a global as well as a local perspective.
We would like to thank all the contributors, many of whom lecture in the Executive Program in Transfer Pricing (EPTP) offered by the University of Lausanne (UNIL), for making this book a reality. Specifically, we would like to thank Mirko Severi (former EPTP alumnus) for coordinating and ensuring that the book gets finalized.
Prof Robert Danon
Prof Guglielmo Maisto
Prof Vikram Chand
Mrs Gabriella Cappelleri
Lausanne / Milan, October 2020
Table of Contents
Editors v
Contributors vii
Preface xxv
CHAPTER 1
The Rise (and Fall?) of the Profit Split Method
Guglielmo Maisto 1
I Introduction 1
II Brief History of the Profit Split Method 2
III The Profit Split as the Most Appropriate Method 5
1 The Profit Split Method in a Nutshell 5
2 When to Apply the Profit Split Method under the OECD TP Guidelines 7
3 How to Apply the Profit Split Method 10
IV The Application of the Profit Split Method to Agency PEs 12
1 Possible Use of the Profit Split to Allocate Profits to Agency PEs 12
2 Parallel Application of Article 7 and Article 9 of the OECD Model in the Case of Agency PEs 13
3 Interactions Between the TP Guidelines and the Authorized OECD Approach 14
A Risk Management Functions Versus Significant People Functions Relevant to the Assumption and/or Management of Risks 14
B Assumption of Risks 16
4 The Profit Split as the Most Appropriate Method to Allocate the Profits Between the Enterprise Head Office and the PE 18
V Open Issues: How Does the Profit Split Method Influence Tax TreatyPolicy and Interpretation? 20
1 Profit Split Versus PE Separate Entity (And Accounting) Approach 20
2 Does Profit Split Affect the Interpretation and Application of Other Treaty Provisions? 22
3 Profit Split, Business Integration and PEs 23
4 Profit Split, Tax Administration and Risks of Misrepresentation of Economic Reality 24
VI Conclusions 25
Selected Bibliography 28
PART I
History and Evolution of the OECD Guidelines 33
CHAPTER 2
History and Evolution of the Profit Split Method in the OECD GuidelinesPaolo Valerio Barbantini 35
I Introduction: Selecting Transfer Pricing Methods 35
II The Selection Process 36
III From the Hierarchy to the Most Appropriate Method Standard 38
IV Criteria to Select the Most Appropriate Method 40
V Importance of the Comparability Analysis in the Selection of the MostAppropriate Method 41
VI The New 2018 Guidance on Transactional Profit Split Methods 42
Selected Bibliography 43
CHAPTER 3
The New Guidance of Chapter I of the OECD Guidelines
Xaver Ditz 45
I Accurately Delineating the Transaction 45
II The New Framework on Risks 48
1 Identifying Economically Significant Risks with Specificity 48
2 Contractual Assumption of Risk 49
3 Functional Analysis in Relation to Risk 49
4 Interpreting Steps 1-3 50
5 The Allocation of Risk 50
6 The Pricing of a Transaction 50
III Recognition of an Accurately Delineated Transaction Pursuant toArticle 9 OECD MTC 50
Selected Bibliography 52
PART II
Revised Guidance on the Application of the Transactional Profit SplitMethod 53
CHAPTER 4
The BEPS Action Plan and Updating the OECD Guidance on Profit SplitMethod
Andrew Hickman 55
I Profit Splits and the BEPS Action Plan 55
II Updating the OECD Guidance on Profit Splits 61
III Distinction Between Transactional Profit Split of Anticipated Profits andTransactional Profit Split of Actual Profits 63
IV The Strengths and Weaknesses of the Profit Split Method 66
V Conclusion on Profit Splits and BEPS Action Plan 67
CHAPTER 5
When Is a Transactional Profit Split Method the Most AppropriateMethod?
Caroline Silberztein 69
I Introduction 69
1 Is the Revised Guidance on Profit Split a Game-Changer as to the Range of Situations in Which a Profit Split Method Would Be Selected? 70
2 Some Considerations in Relation to the Examples Included in the Revised Annex II 71
II Factors That Are Deemed Relevant to Determine Whether a Profit Split Is
the Most Appropriate Method 72
1 Accurate Delineation of the Transaction 72
2 Role of the ‘Relevant Factors’: Relevant, but Not Determinative and Not Sufficient by Themselves 73
3 Interaction with the Arm’s-Length Principle: Evidence from Third-Party Behaviours 74
III First Relevant Factor: Unique and Valuable Contributions by Each of theParties to the Transaction 74
1 The Notion of ‘Contributions’ 74
2 Unique Contributions 75
3 Valuable Contributions 75
4 ‘Unique and Valuable Contributions’ by Each Party to the Transaction 76
5 Practical Examples Relevant to the ‘Unique and Valuable Contributions’ 76
IV Second Relevant Factor: Highly Integrated Business Operations 79
1 The Notion of ‘High Integration’ 79
2 ‘Joint Performance’ 80
3 High Degree of Interdependency 82
V Third Relevant Factor: Shared Assumption of Economically SignificantRisks, or Separate Assumption of Closely Related Risks 83
1 Focus on ‘Economically Significant Risks’ 83
2 Shared Assumption by the Parties of Economically Significant Risks 84
3 Separate Assumption of Closely Interrelated and/or Correlated Risks 84
4 Case Where Economically Significant Risk Assumed by One Party Is Partly Controlled by Another Party 86
VI Lack of Comparables Is, by Itself, Insufficient to Warrant the Use of aProfit Split Method 87
VII Industry Practices 88
VIII Losses 88
IX Use of a Profit Split Method as Primary Method or as a SanityCheck/Secondary Method 88
X Hard-to-Value Intangibles 89
XI Concluding Remarks 91
CHAPTER 6
Application of the Profit Split Method
Harlow Higinbotham & Vladimir Starkov 93
I Introduction 93
1 Contribution Versus Residual Analyses 94
2 Distinction Between Transactional Profit Split of Anticipated
Profits and Transactional Profit Split of Actual Profits 95
3 Determination of the Combined Profit/Loss to Be Split 96
4 Profit Split Factors 97
A Capital as a Profit Split Factor 98
B Value Chain Analysis 98
5 Adjustments to Profit Split Factors 99
Selected Bibliography 101
CHAPTER 7
Administrative Approaches to Profit Split MethodBruno Gibert & Celine Pasquier 103
I Introduction 103
II Administrative Approaches to PSM 104
1 The Role of Transfer Pricing Documentation 104
2 Profit Split and Audits 105
A How to Audit the PSM Applied by a Taxpayer? 105
B Can a PSM Be Applied in an Audit? 106
C Towards Simultaneous Tax Examinations? 107
3 Approaches to the PSM in Cooperative Environments (APAs) and
Dispute Resolution Procedures (MAPs) 108
A Approaches to the PSM in APAs 108
B Approaches to the PSM in MAPs 109
Selected Bibliography 110
PART III
The Profit Split Method from Other Perspectives 113
CHAPTER 8
Potential State Aid Exposure in Case of Tax Rulings Based on the ProfitSplit Method
Gabriella Cappelleri & Mario Tenore 115
I Introduction 115
II EU State Aid and Tax Rulings 116
1 The Commission’s Investigations on Tax Rulings 116
III The Transfer Pricing Analyses under the Commission’s View: Focus onthe Application of the Profit Split Methodology 120
1 General Remarks on the Commission’s Assessment 120
2 The Position of the EU Vis-à-Vis the Profit Split Method 121
3 Envisaged Risks Connected to the Application of the Profit Split
Method 122
Selected Bibliography 123
CHAPTER 9
The Work of the Joint Transfer Pricing Forum on the Profit Split MethodMauro Faggion & Simone Di Vaia 125
I Background 125
II Sectors and Industries Where the Profit Split Method Is Applied andCommon Features of the Supply Chain 125
III Reasons to Consider the Profit Split Method the Most AppropriateMethod 126
IV Main Challenges in Applying the Profit Split Method 126
1 Choosing the Measure of Profit 127
2 Choosing Profit Splitting Factors 127
V JTPF Area of Work 127
VI A Proposal for Simplification 128
VII The Report on ‘The Application of the Profit Split Method Within the EU’ 130
1 The Use of the Profit Split Method 130
2 How to Split the Profit 131
A People-Based Factors 131
B Cost-Based Factors 132
C Sales/Volume-Based Factors 133
D Asset-Based Factors 133
VIII Concluding Remarks 133
Selected Bibliography 133
CHAPTER 10
The Impact of Profit Split to Indirect Taxes, with Emphasis on EuropeanVAT
Andrea Parolini 135
I Introduction 135
II The Notion of ‘Taxable Amount’ in the VAT Directive 136
III Interaction Between Arm’s-Length Principle and the ‘Taxable Amount’Relevant for VAT Purposes 137
IV Relevance of TP Adjustments Based on the Profit Split Method for VATPurposes 139
1 The Existence of a ‘Direct Link’ 139
2 Application of Article 80 of the VAT Directive 140
V Transfer Pricing and Customs Valuation Within the EU 142
VI Conclusions 143
Selected Bibliography 143
PART IV
Comparative Analysis 145
CHAPTER 11
A Comparative Analysis of the UN and OECD Approaches on theTransactional Profit Split Method and Formulary Apportionment
Michael Kobetsky 147
I Introduction 147
1 The Status of the 2017 OECD TPG and the UN Manual 149
II UN Profit Split Method 150
1 Background 150
2 Methods to Allocate Profits 150
3 Comparable Profit Split Method 152
4 Strengths and Weaknesses of the Transactional Profit Split Method 152
5 When to Use the Transactional Profit Split Method 153
III The OECD Transactional Profit Split Method 154
1 When the Transactional Profit Split Method Is Applicable 155
A Unique and Valuable Contributions by the Parties 155
B Highly Integrated Business Operations 157
C Shared Assumption of Economically Significant Risks and Separate Accounting of Closely Related Risks 157
2 Transactional Profit Split of Anticipated Profits and Actual Profits 158
3 Strengths and Weaknesses of the Transactional Profit Split Method: UN and OECD Approaches 159
IV Formulary Apportionment 161
1 Advantages of Formulary Apportionment 163
A Simplicity 163
B Compliance and Administration Costs 163
C Reflects Economic Reality 164
2 Disadvantages of Using Formulary Apportionment 164
A Arbitrary Allocation 164
B Double Taxation 165
C Potential for Profit Shifting 166
3 The Apportionment Factors 166
A Sales 166
B Payroll 167
C Assets 168
V Conclusion 169
Selected Bibliography 169
PART V
Countries Experience 171
CHAPTER 12
Countries Experience: Status Quo and Likely Evolutions – France
Bruno Gibert 173
I Introduction 173
1 Legal Framework 173
2 Transfer Pricing Method Selection 173
II Practical Application of the PSM in France 174
1 Application of the PSM in Designing the Group Transfer Pricing
Policy 174
2 The Operators’ Experience When Liaising with the FTA: Audits 174
3 The Operators’ Experience When Liaising with the FTA: APA Procedures and MAPs 175
Annex 1 Legal Framework 177
Annex 2 Relevant Regulations and Case Law 178
CHAPTER 13
Countries Experience: Status Quo and Likely Evolutions – Germany
Xaver Ditz 179
I Introduction 179
1 Legal Framework 179
II Transfer Pricing Method Selection 180
III Practical Application of the Profit Split Method in Germany 181
1 Significant Profit Measures 181
2 Methods 182
3 Valuation Rules in Practice 182
Selected Bibliography 183
Annex 1 Legal Framework 184
Annex 2 Relevant Regulations and Case Law 188
CHAPTER 14
Countries Experience: Status Quo and Likely Evolutions – Italy
Aurelio Massimiano & Marco Valdonio 189
I Introduction 189
1 Legal Framework 189
2 Transfer Pricing Method Selection 191
II Practical Application of the Profit Split Method in Italy 194
1 Application of the Profit Split Method in Designing the Group
Transfer Pricing Policy 194
2 The Operators’ Experience When Liaising with ITA: Audits 196
3 The Operators’ Experience When Liaising with Italian Tax
Authorities: APA Procedures 199
Selected Bibliography 200
Annex 1 Legal Framework 201
Annex 2 Relevant Regulations and Case Law 202
CHAPTER 15
Countries Experience: Status Quo and Likely Evolutions – Spain
Joan Hortalà i Vallvé 205
I Introduction 205
1 Legal Framework 205
II Practical Application of the Transactional PSM in Spain 207
1 Court Cases Addressing Transactional PSM 207
2 Tax Audit Practice Concerning Transactional PSM 208
3 Most Likely Development of the Transactional PSM in Spain 208
Selected Bibliography 209
Annex 1 Legal Framework 210
Annex 2 Case Law 218
CHAPTER 16
Countries Experience: Status Quo and Likely Evolutions – Switzerland
Raoul Stocker & Patrick Schmid 219
I Introduction 219
1 Legal Bases for Corporate Taxation 219
A The Swiss Tax System 219
B Adjustment of the Taxable Profit 220
a Hidden Profit Distribution 220
b Cross-Border Transactions of MNEs 221
2 Retroactivity of OECD TPG 222
II Transfer Pricing Method Selection 223
III Practical Application of PSM 224
1 General Remarks 224
2 Investment Funds 225
3 Remuneration for Intangibles 226
4 Global Trading and Commodities Trading 226
5 Allocation to Intercantonal Permanent Establishments 228
6 Checking the Results in Complex Cases 229
Selected Bibliography 229
Annex 1 Legal Framework 231
Annex 2 Relevant Regulations and Case Law 232
CHAPTER 17
Countries Experience: Status Quo and Likely Evolutions – UnitedKingdom (England and Wales)
Steve Edge & Alicia Tan 233
I Introduction 233
II Transfer Pricing Method Selection 234
III Practical Application of the Profit Split Method 234
Selected Bibliography 236
Annex 1 Legal Framework 237
Annex 2 Relevant Regulations and Case Law 240
CHAPTER 18
Countries Experience: Status Quo and Likely Evolutions – United States
Yariv Brauner 241
I Introduction 241
II Transfer Pricing Method Selection 242
1 Profit Split Method 243
A Origins 243
B The Regulations 243
III Practical Application of the Profit Split Method 245
1 Application of the Profit Split Method in Designing the Group
Transfer Pricing Policy 245
2 The Taxpayers’ Experience When Liaising with US Tax Authorities
and Tax Courts 246
Selected Bibliography 246
Annex 1 Legal framework 247
Annex 2 Relevant Regulations and Case Law 255
PART VI
Digital Business Models and Digitalization of the Economy 257
CHAPTER 19
Cross-Border Allocation of MNEs Profits (Losses) in Light of theDigitalization of the Economy: An Assessment of AmountA&B
Vikram Chand 259
I Introduction 259
II Scope 260
1 Preliminary Remarks 260
2 Businesses in Scope and Out of Scope Based on Activities 262
A Consumer-Facing Businesses 262
B User-Facing Businesses or Highly Digital Businesses 264
C Businesses Outside the Scope of Amount A 265
3 Further Criteria: Turnover Thresholds 266
III Nexus 267
1 Preliminary Remarks 267
2 Nexus Built on an MNE Group Basis 268
3 Focus on Local Revenue 268
4 Degree of Permanence Requirements 269
5 Setting the Local Revenue Threshold 269
IV Profit (Loss) Allocation: Amount A 270
1 Overview of the Method 270
A Introductory Comments 270
B Step 1: Calculation of MNE Group Profits or MNE Group Profit Margin 271
C Step 2: Calculation of Routine and Non-routine Operating Profit Margin 273
D Step 3: Splitting the Non-routine Margin 274
E Step 4: Allocation to Market (Sales) Countries 274
2 Profit Allocation: High-Level Illustration of This Method 274
3 Dealing with Losses and Loss Allocation 275
4 Selected Issue: The Issue of Double Counting in a Decentralized Setup 276
V Sourcing Rules: Determination of Location of Sales and Profit Allocation 277
1 Developing Sourcing Rules 277
2 Consumer Product or Consumer Service or Franchising Businesses 279
A Revenues from Consumer Products 279
B Revenues from Consumer Services 280
C Revenues from Franchising Businesses 280
3 Highly Digitalized Businesses 280
A Revenue from Online Advertising 280
B Revenue from Sale of User Data 281
C Commission Revenues from Intermediation Services 281
D Digital Content Services 282
E Cloud Services 283
VI Elimination of Double Taxation: Surrender Jurisdiction 283
1 Identification of Paying Entities 283
2 Relief Mechanisms 285
VII Dispute Prevention Mechanisms and Tax Certainty 285
VIII Implementation of Amount A 286
1 Information Exchange for Amount A 286
2 Collection of Taxes by Market Countries 286
3 New Multilateral Convention 286
IX Profit Allocation: Amounts B 287
X Conclusion 289
Selected Bibliography 289
CHAPTER 20
Application of the Profit Split Method to Digital Business Models and tothe Digitalization of the Economy
Vikram Chand 295
I Introduction 295
II Profit Allocation Among Separate Legal Entities Within an MNE 297
1 Post-BEPS Transfer Pricing Guidance 297
A Accurate Delineation of the Transaction 297
B The Transactional Profit Split Method 299
2 Application to Selected Digital Business Models 301
III Profit Allocation Among Head Office and PEs Within an MNE 303
1 Post-BEPS Profit Attribution Framework 303
2 Application to Selected Digital Business Models 304
IV The Current Status of the Existing Profit Allocation Framework 308
V Profit Allocation and the Digitalization of the Economy: A Lead into theDebate 309
1 The Profit Allocation Issue 309
2 The Profit Allocation Solutions 310
A The Modified Residual Profit Split Method 310
B Fractional Apportionment Method 312
C Distribution-Based Approach 313
3 High-Level Policy Assessment 314
VI Conclusion 315
Selected Bibliography 315
PART VII
Selected Industry Experiences 319
CHAPTER 21
Selected Industry Experiences and Theoretical Approaches
Emmanuel Llinares & Amanda Pletz 321
I Introduction 321
II Application of the Profit Split Method in the Financial Services Industry 322
1 Introduction 322
2 Facts of the Case 323
A Summary of Function and Related-Party Transactions 323
B Summary Value Chain and Functional Assets and Risks Analysis 324
C A Note on Method Selection 325
3 Economic Analysis: Application of the Profit Split Method 326
A Step 1: Identification of Costs by Function and by Value Driver 326
B Step 2: Routine Remuneration 329
C Step 3: Discussion on Residual Profit Split Factor 329
D Checking Consistency with Application of Other Methods 331
4 Concluding Remarks 332
III Application of the Profit Split Method in the Technology Industry 332
1 Introduction 332
2 Facts of the Case and Method Selection 333
A Summary of Functions and Related-Party Transactions 333
B Summary Value Chain Analysis 334
C A Note on Method Selection 335
3 Economic Analysis: Application of the Profit Split Method 336
A Stage 1: Determination of the Routine Remuneration 337
B Stage 2: Split of the Residual Profits 340
4 Concluding Remarks 343
IV Application of the Profit Split Method in the Fashion Industry 343
1 Introduction 343
2 Facts of the Case 344
3 Application of the Profit Split Method 345
A A Note on Method Selection 345
B Description of Approach 346
C Data Relied Upon 347
4 Concluding Remarks 350
Selected Bibliography 350
Index 353
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